Summary of HUD’s LEAN 232 Program E-Mail Blast: Office of Residential Care Facilities (ORCF), November 12, 2013

In an effort to summarize the highlights of the U.S. Department of Housing and Urban Development (HUD) LEAN E-mail Blasts that we receive, and rarely have time to review in a timely fashion, we at Pepper are providing this quick synopsis of the latest LEAN update. Our aim is to provide pertinent information succinctly as a roadmap to the LEAN E-mail Blasts, not to replace the LEAN E-mail Blasts. We hope you find these summaries helpful. A link to the complete November 12, 2013 LEAN E-mail Blast can be found here.

New Document Implementation Matrix

ORCF has created a matrix with guidance on when the use of old documents may be allowed for certain special circumstances (e.g., Master Leases, AR Financing, TPAs, etc.). The matrix discusses various scenarios and explains which of the new documents are required and when some or all of the old documents are permitted.

Non-Material Changes to Lease Payments

HUD recognizes that operator lease payments occasionally need to be adjusted. The new Healthcare Regulatory Agreement—Operator (Form HUD-92466A-ORCF) anticipates that prior HUD approval is only required when the lease payment is materially changed. ORCF clarified that so long as: (1) the proposed change in lease payment maintains a lease coverage of 1.05 or greater; (2) the loan is not in default; and (3) there are no other concurrent material changes to the lease agreement; then the change in rental payment is not a "material change." If the revision to the lease payment does not constitute a material change, HUD does not have to be notified.

Criteria for Bathroom Waivers

The June 27, 2012 and April 30, 2012 E-mail Blasts outlined the procedures to expedite the submission and consideration of requests for bathroom waivers of 24 CFR 232.7 (formerly 24 CFR 232.3). Since the expedited approach is not always feasible, lenders are requested to expedite only if all the factors set forth in the LEAN Update are applicable.

National Fire Protection Association (NFPA)-13 Sprinkler Systems Compliance

As previously mentioned in the April 29, 2013 and August 28, 2013 E-mail Blasts, the Centers for Medicare & Medicaid Services (CMS) requires all nursing homes be fully sprinkler compliant per the 1999 Edition of the NFPA-13 Standard for the Installation of Sprinkler Systems as of August 13, 2013. HUD must honor CMS's requirement and therefore cannot add nursing homes to their portfolio that are not NFPA-13 compliant. Lenders should ensure NFPA-13 compliance...